Time to Refinance your Mortgage?

Mortgage rates have recently plunged to record lows. Right now a 30 year conforming fixed rate is around 5.00%, near historic lows and a 15 year conforming mortgage can be had for 4.75%, another historic low.

What better time to refinance your mortgage or purchase a home than now? If you plan to stay in your home a long time, you can ride out any more housing price declines that might occur in the near future. 

Over the past several years, refinancing meant using your home as a piggy bank. You know you can refinance without taking money out. In fact, we recommend that you don’t take money out. Refinancing with a lower interest rate can save you thouands of dollars in the long run.

Will refinancing your mortgage work for you? There are a few general guidelines to consider when refinancing.

1. If you can get a mortgage rate 1% or more lower than your current mortgage rate.
2. How much equity do you have in your home? Most banks are once again requiring that the loan-to-value ratio (LTV) does not exceed 80%. In other words, a bank will lend you up to 80% of the total value of your home. If your home is appraised for $1,000,000, the loan cannot exceed $800,000.
3. Another stringent requirement is an excellent credit score. A couple of years ago banks were handing out mortgages to people who had credit scores in the 500’s. However, most banks are now requiring a minimum score of 725.

If you meet all the guidelines mentioned, you might want to consider looking into refinancing your mortgage. You can use Monitor Bank Rate’s mortgage calculator to help you figure out if refinancing makes financial sense for you.